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Legal fee issue leads to dismissal of tax-shelter charges

A federal judge today dismissed indictments against 13 former KPMG executives in what has been called the biggest criminal tax case in U.S. history.

Gavel3_2 U.S. District Judge Lewis A. Kaplan issued his ruling (full text here, courtesy of the Wall Street Journal), saying he had no alternative but to dismiss the indictment after determining last year that prosecutors violated the former accounting firm executives' constitutional rights by putting undue pressure on KPMG not to advance them defense costs.

The dismissal is not necessarily bad news for the feds.

In fact, federal prosecutors had urged the judge to do just that. The reason, according to some legal experts, is that is could allow the government to resume its case against all of the defendants if a higher court overrules Kaplan on the constitutionality issue.

And so grind on the wheels of tax justice.

To help you keep track, the WSJ's Law Blog has The KPMG Case for Dummies.

Protect yourself: The folks who come up with creative tax shelters aren't the only ones who end up paying. If you get involved in one that the IRS rules is abusive, you've got to pay back any tax breaks the set-up originally got you.

For tips on how to avoid buying into an abusive tax shelter, check out this story written shortly after the KPMG shelter case broke.



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